Deck 3: Money Management Strategy: Financial Statements and Budgeting

Question 1

In order to calculate a person's savings ratio,the amount saved each month is divided by net income.

Answer 1

False

Question 2

WiseBanyan is an innovative website that offers a free financial advisor that suggests and manages investments for your financial goals.

Answer 2

True

Question 3

Which category of a home file includes stock and bond purchase documents?

A)Investment records
B)Insurance records
C)Estate planning records
D)Tax records
E)Consumer purchase records

Answer 3

Investment records

Question 4

A budget is a spending plan that outlines how you will spend available income.

Question 5

Which of the following would be organized as a personal and employment record in a home file?

A)Budget
B)Paycheck stub
C)Social Security number
D)Property tax bill
E)Lease

Question 6

Which of the following financial documents would most likely be stored in a safe-deposit box?

A)W-2 forms
B)Personal financial statements
C)Warranties
D)Birth certificates
E)Checking account statements

Question 7

Furniture,jewelry,and an automobile are examples of liquid assets.

Question 8

A home file should be used for:

A)storing all financial documents and records.
B)financial records for current needs.
C)documents that require maximum security.
D)obsolete financial documents.
E)records that are difficult to replace.

Question 9

Take-home pay is a person's earnings after deductions for taxes and other items.

Question 10

Which of the following are considered to be personal financial statements?

A)Budget and credit card statements
B)Personal balance sheet and cash flow statement
C)Checkbook and budget
D)Tax returns
E)Bank statement and savings statement

Question 11

Financial payments that do not vary from month to month are referred to as variable expenses.

Question 12

Money management refers to long-term investment decisions.

Question 13

For many years,the United States has ranked highest among industrial nations in savings rate.

Question 14

A person's net worth is the difference between the value of the items owned and the amounts owed to others.

Question 15

Opportunity costs refer to:

A)current spending habits.
B)changing economic conditions that affect a person's cost of living.
C)storage facilities to make financial documents easily available.
D)trade-offs associated with money management decisions.
E)avoiding the use of consumer credit.

Question 16

Insolvency occurs when liabilities far exceed available assets.

Question 17

A personal balance sheet reports your personal income and expenditures.

Question 18

Discretionary income is money left over after paying for housing,food,and other necessities.

Question 19

Opportunity costs are only associated with money management decisions involving long-term financial security.

Question 20

Warranties are commonly kept with ________ purchase and automobile records in a home file.

A)investment
B)insurance
C)credit
D)financial service
E)consumer

Question 21

Cash and other tangible property (with a monetary value)that you own are referred to as:

A)liabilities.
B)variable expenses.
C)net worth.
D)income.
E)assets.

Question 22

Current liabilities differ from long-term liabilities based on:

A)the amount owed.
B)the financial situation of the creditor.
C)the interest rate charged.
D)when the debt is due.
E)current economic conditions.

Question 23

Ben Chase needs to pay off some of his debts over the next few months.Which item on his balance sheet would help him decide what amounts are due within one year?

A)Budget variance
B)Investment assets
C)Long-term liabilities
D)Current assets
E)Current liabilities

Question 24

A common deduction from a person's paycheck is for:

A)interest.
B)Social Security taxes.
C)rent.
D)unemployment.
E)current liabilities.

Question 25

A cash flow statement reports a person's or a family's:

A)net worth.
B)cash receipts and payments.
C)plan for spending.
D)value of investments.
E)balance of savings.

Question 26

A family with $50,000 in assets and $22,000 of liabilities would have a net worth of:

A)$50,000.
B)$28,000.
C)$22,000.
D)$67,000.
E)$41,000.

Question 27

Funds set aside for retirement is an example of a(n)________ asset.

A)personal
B)common
C)investment
D)household
E)budgeted

Question 28

A person's net worth would increase as a result of:

A)reducing the amounts you owe to others.
B)decreasing savings.
C)increasing spending for current living expenses.
D)decreasing the value of personal possessions.
E)decreasing the value of investments.

Question 29

The value of items owned minus the amounts owed to others equals:

A)net assets.
B)net worth.
C)total liabilities.
D)total income.
E)budgeted expenses.

Question 30

The current financial position of an individual or family is best presented with the use of a:

A)budget.
B)cash flow statement.
C)balance sheet.
D)bank statement.
E)time value of money report.

Question 31

Liquid assets refer to:

A)amounts that must be paid soon.
B)cash and items of value that can be easily converted to cash.
C)total income available to a family for spending.
D)the value of investments.
E)amounts on which taxes must be paid.

Question 32

A personal balance sheet presents:

A)amounts budgeted for spending.
B)income and expenses for a period of time.
C)earnings on savings and investments.
D)items you own and amounts you owe.
E)family financial goals.

Question 33

Total earnings of a person minus the deductions for taxes and other items is called:

A)budgeted income.
B)gross pay.
C)net worth.
D)total revenue.
E)take-home pay.

Question 34

A person's net worth is computed by:

A)adding assets and liabilities.
B)deducting current living expenses from total assets.
C)subtracting total liabilities from total assets.
D)subtracting assets from current liabilities.
E)adding liabilities and budgeted expenses.

Question 35

Liabilities are amounts representing:

A)debts owed now.
B)items of value.
C)living expenses.
D)taxable income.
E)current assets.

Question 36

Which one of the following presents a summary of cash receipts and payments for a period of time?

A)Balance sheet
B)Credit card statement
C)Investment summary
D)Cash flow statement
E)Asset report

Question 37

Edward Boston wants to reduce his fixed expenses.Which action would be appropriate?

A)Get a part-time job
B)Eat more meals at home rather than in restaurants
C)Find a place to live with a lower rent
D)Save more money for the future
E)Buy on credit items that might cost more later

Question 38

Which one of the following illustrates an insolvent situation?

A)Assets $56,000; annual expenses $60,000
B)Assets $78,000; net worth $22,000
C)Liabilities $45,000; net worth $6,000
D)Assets $40,000; liabilities $60,000
E)Annual cash inflows $45,000; liabilities $50,000

Question 39

Which of the following would be considered a long-term liability?

A)Charge account
B)Mortgage
C)Six month cash loan
D)Tax payment
E)Insurance premium

Question 40

Payments that do not vary from month to month are ________ expenses.

A)fixed
B)usage
C)variable
D)luxury
E)output

Question 41

To determine a person's solvency,which financial document should be consulted?

A)Cash flow statement
B)Budget
C)Debt consolidation statement
D)Personal balance sheet
E)Credit report

Question 42

Nicholas Bowman has a savings account with $825 in it.He knows that he can easily withdraw this money and spend it whenever he wishes.This would be an example of:

A)money management.
B)a personal possession.
C)a limited asset.
D)a liquid asset.
E)net worth analysis.

Question 43

A family has a net worth of $165,000 and liabilities of $176,000,what is the amount of their assets?

A)$11,000
B)$165,000
C)$176,000
D)$341,000
E)$506,000

Question 44

If a family planned to spend $400 for food during April but only spent $350,this difference would be referred to as a:

A)surplus.
B)deficit.
C)fixed living expense.
D)budget reduction.
E)contribution to net worth.

Question 45

Patricia McDonald has determined the following information about her own financial situation.Her checking account is worth $545 and her savings account is worth $1,000.She owns her own home that has a market value of $119,000.She has furniture and appliances worth $8,500 and a laptop worth $1,200.She has a car worth $9,700 and owes $8,200 on her auto loan.She has also purchased some stock worth $5,500 and she has a retirement account worth $27,655.What is the total value of her assets?

A)$1,545
B)$119,000
C)$27,800
D)$44,050
E)$173,100

Question 46

Karen Phillips has created a financial statement for herself that lists all of the assets she owns as well as the debts she owes.This would be an example of:

A)money management.
B)opportunity cost analysis.
C)a personal balance sheet.
D)a liquidation exercise.
E)a budget variance.

Question 47

Kyle Burroughs has decided to put $30 more per week in his savings account.He knows this will reduce his ability to go out to eat each week but thinks building his emergency fund is important.This would be an example of:

A)a budget variance.
B)an opportunity cost.
C)a balance sheet.
D)an accounting error.
E)a budget anomaly.

Question 48

During the past month,Jennifer Johnson had income of $3,500.During the month,her net worth declined by $300.If no other financial activities occurred,this means Jennifer's payments for the month were:

A)$3,800.
B)$3,500.
C)$3,200.
D)$300.
E)$0.

Question 49

Patricia McDonald has determined that the value of her liquid assets is $4,500,the value of her real estate is $135,000,the value of her personal possessions is $58,000,and the value of her investment assets is $72,000.She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000.What is Patricia's net worth?

A)$269,500
B)$105,500
C)$164,000
D)$205,500
E)$132,000

Question 50

Which of the following payments would be considered a variable expense?

A)Rent
B)Installment loan payment
C)Mortgage payment
D)Monthly train ticket for commuting to work
E)Electricity bill

Question 51

A budget deficit would result when a person's or family's:

A)actual spending is less than planned spending.
B)actual spending is greater than planned spending.
C)actual spending equals planned spending.
D)assets exceed liabilities.
E)net worth decreases.

Question 52

Changes in the cost of living:

A)vary depending on where you live.
B)are the same for different locations.
C)are constant from month to month.
D)are the same for all goods and services.
E)are not a factor when preparing a budget.

Question 53

Leeanna Roberts uses a computer to organize her personal financial records and update her budget activities.These activities are an example of:

A)money management.
B)an opportunity cost.
C)a balance sheet.
D)creative accounting.
E)electronic analysis.

Question 54

Improvements in a person's financial position are the result of:

A)increasing liabilities.
B)reducing earnings.
C)saving current income and investing
D)increasing purchases on credit.
E)withdrawing amounts from savings.

Question 55

A personal balance sheet:

A)predicts income and expenses.
B)reports what an individual or a family owns and owes.
C)reports income and expenses for an individual or a family.
D)predicts investment success.
E)analyzes debt payment activities.

Question 56

When it comes to savings,most Americans:

A)have an adequate emergency fund.
B)devote large portions of their income to savings.
C)find saving difficult.
D)keep substantial amounts in a regular savings account.
E)reduce the amount they save during their working life.

Question 57

Kathy Thompson has determined that the value of her assets is $64,000 and the value of her debts is $23,000.The difference between these two is $41,000.The $41,000 could be referred to as her:

A)nest egg.
B)total assets.
C)adjusted assets.
D)debt equity.
E)net worth.

Question 58

Which one of the following cash outflows should be listed first on a Cash Flow Statement?

A)Variable expenses
B)Food expenses
C)Fixed expenses
D)Utility expenses
E)Recreation expenses

Question 59

Which one of the following is the best example of a long-term goal for a married couple with no children?

A)Buy a new car
B)Increase life insurance
C)Increase savings
D)Provide for retirement income
E)Complete college

Question 60

A decrease in net worth could be the result of:

A)inflows exceeding outflows for a month.
B)outflows exceeding inflows for a month.
C)assets exceeding expenses.
D)increased earnings on the job.
E)inflows and outflows being equal for a month.

Question 61

When preparing her monthly budget,Maria Kent has projected income of $3,700.Each month she pays $1,200 in rent,$42 for life insurance,and $240 for her auto loan.What percentage of her budget goes for these fixed expenses?

A)6 percent
B)12 percent
C)27 percent
D)40 percent
E)60 percent

Question 62

Jeremy Allison needs to store the title to his car and his military papers.Where is the most appropriate place for Jerry to store this information?

A)Home file
B)Safe deposit box
C)Personal computer
D)Best friend's house
E)No storage needed

Question 63

Chris Carter needs to store monthly statements from his bank,his credit card company and his savings accounts.Where is the most appropriate place for Chris to store this information?

A)Home file
B)Safe deposit box
C)File at work
D)Best friend's house
E)No storage needed

Question 64

Catherine Jones has determined the following information about her own financial situation.Her checking account is worth $850 and her savings account is worth $1,200.She owns her own home that has a market value of $98,000.She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300.She has a car worth $12,500.She has recently purchased a mutual fund worth $4,500 and she has a retirement account worth $62,300.What is the value of her investment assets?

A)$2,050
B)$98,000
C)$27,800
D)$66,800
E)$171,900

Question 65

Which of the following is typically considered to be a personal and employment record?

A)Birth certificate
B)Current résumé
C)Employee benefit information
D)Social Security number
E)All of these

Question 66

Catherine Jones has determined the following information about her own financial situation.Her checking account is worth $800 and her savings account is worth $1,100.She owns her own home that has a market value of $122,000.She has furniture and appliances worth $9,500 and a laptop worth $1,400.She has a car worth $12,500.She has recently purchased a mutual fund worth $5,500 and she has a retirement account worth $32,500.What is the total value of her assets?

A)$127,850
B)$122,000
C)$168,600
D)$159,900
E)$185,300

Question 67

A person has $1,550 in liabilities,monthly savings of $200,and monthly gross income of $2,000.What is the person's savings ratio?

A)0.77
B)0.10
C)2.35
D)0.16
E)12.90

Question 68

Catherine Jones has determined the following information about her own financial situation.Her checking account is worth $850 and her savings account is worth $1,200.She owns her own home that has a market value of $119,000.She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300.She has a car worth $12,500.She has recently purchased a mutual fund worth $5,500 and she has a retirement account worth $38,550.What is the value of her real estate assets?

A)$2,050
B)$119,000
C)$27,800
D)$44,050
E)$171,900

Question 69

Jeff Willis has a budget that he follows each month.He has used spreadsheet software to help him determine what he wants to spend each month.At the end of the month,the spreadsheet software automatically compares what he budgeted with what he spent.Jeff can also graph these results if he wants to.What type of budget has Jeff created?

A)Mental budget
B)Physical budget
C)Written budget
D)Computerized budget
E)None of these

Question 70

The Garcia family budgets $400 a month for food.Last month they spent $393,which creates a:

A)budget surplus of $7.
B)budget deficit of $7.
C)budget surplus of $400.
D)budget deficit of $393.
E)balanced budget.

Question 71

Jamie McFarland has determined that the value of her liquid assets is $4,500,the value of her real estate is $128,000,the value of her personal possessions is $62,000,and the value of her investment assets is $73,000.She has also determined the value of her current liabilities is $5,700 and the value of her long-term liabilities is $89,000.What is the total value of her debts?

A)$267,500
B)$94,700
C)$162,000
D)$205,500
E)$172,800

Question 72

Jamie McFarland has determined that the value of her liquid assets is $4,500,the value of her real estate is $128,000,the value of her personal possessions is $62,000 and the value of her investment assets is $73,000.She has also determined the value of her current liabilities is $5,700 and the value of her long-term liabilities is $89,000.What is Jamie's net worth?

A)$267,500
B)$94,700
C)$172,800
D)$205,500
E)$162,000

Question 73

Andrew Smith has developed a budget that he follows each month.This is a budget that he keeps in his head.He does not write anything down,nor does he use a computer to keep track of this budget.What type of budget has Andrew created?

A)Mental budget
B)Physical budget
C)Written budget
D)Computerized budget
E)Cloud budget

Question 74

This month,Kenneth Goldberg has cash inflows of $2,950 and cash outflows of $2,800,resulting in a:

A)balanced budget.
B)surplus of $150.
C)deficit of $150.
D)surplus of $2,950.
E)deficit of $2,800.

Question 75

Jonathan Winters has developed a budget that he follows each month.Jonathan has an envelope for each type of expenditure.After he cashes his paycheck,he puts the amount of cash in each envelope that he plans to spend on that category each month.What type of budget has Jonathan created?

A)Mental budget
B)Physical budget
C)Written budget
D)Computerized budget
E)Cloud budget

Question 76

Catherine Jones has determined the following information about her own financial situation.Her checking account is worth $850 and her savings account is worth $1,200.She owns her own home that has a market value of $98,000.She has furniture and appliances worth $8,500 and a laptop worth $1,200.She has a car worth $9,700.She has recently purchased a mutual fund worth $5,500 and she has a retirement account worth $38,550.What is the value of her personal possessions?

A)$2,050
B)$98,000
C)$19,400
D)$44,050
E)$171,900

Question 77

George Green has determined that the amount of money he spends on his mortgage payment,car loan payment,and home insurance payment totals $1,200 every month.What type of expenses has George determined with this calculation?

A)Current liabilities
B)Long-term liabilities
C)Net worth
D)Variable expenses
E)Fixed expenses

Question 78

Amy Farmer has developed a budget that she follows each month.She went to the office supply store and purchased a spiral notebook.Each month she writes in what she plans to spend in the various categories.At the end of the month,she writes in the amount that she actually spent in each of these categories and compares this with the budgeted amounts.What type of budget has Amy created?

A)Mental budget
B)Physical budget
C)Written budget
D)Computerized budget
E)None of these

Question 79

Jamie McFarland has determined that the value of her liquid assets is $5,400,the value of her real estate is $182,000,the value of her personal possessions is $26,000,and the value of her investment assets is $73,000.She has also determined the value of her current liabilities is $7,500 and the value of her long-term liabilities is $98,000.What is the total value of her assets?

A)$286,400
B)$182,000
C)$73,000
D)$26,000
E)$7,500

Question 80

Catherine Jones has determined the following information about her own financial situation.Her checking account is worth $500 and her savings account is worth $900.She owns her own home that has a market value of $98,000.She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300.She has a car worth $12,500.She has recently purchased an annuity worth $5,500 and she has a retirement account worth $38,550.What is the value of her liquid assets?

A)$1,400
B)$98,000
C)$27,800
D)$44,050
E)$171,900